The GTAP-E Model: An Extension of the GTAP Model for ......2 EU27 0 -105.612 0 0 0 -334.871 -12.606...

The GTAP-E Model: An Extension of the GTAP Model for Energy and Climate Change Analysis

24th Annual Short Course in Global Trade Analysis

August 12, 2016West Lafayette, USA

GTAP-E production structure

cap

coal

gas

o

vaen

labken

nely ely

eny

p_c

ncoal

non-energy commodities

σ = 0.0

σ = 1.2

σ = 0.5

σ = 0.5

σ = 1.0

σ = 1.0

Emission accounting

• intermediate usage:• CO2DF(i,j,r) and CO2IF(i,j,r)• gco2fd(i,j,r) and gco2fm(i,j,r)

• private consumption:• CO2DP(i,r) and CO2IP(i,r)• gco2pd(i,r) and gco2pm(i,r)

• government consumption:• CO2DG(i,r) and CO2IG(i,r)• gco2gd(i,j,r) and gco2gm(i,j,r)

Carbon taxation

PA = Tnc × PM + TRc × EI, where: PA ≡ agents’ pricePM ≡ market priceTnc ≡ power of non-carbon taxTRc ≡ carbon tax rate ($/tC)EI ≡ emission intensity

(tC/quantity unit)

Emission trading

• emissions accounting and carbon tax at regional and bloc levels:

• actual emissions:• coefficients CO2T(r) and CO2TB(b)• variables gco2t(r) and gco2tb(b)

• emissions quota:• coefficients CO2Q(r) and CO2QB(b)• variables gco2q(r) and gco2qb(b)

• absolute change in real carbon tax: variables RCTAX(r)and RCTAXB(r)

6

With no use of the flexibilitymechanisms

With emission trading among Annex 1 countries

With worldwide emissiontrading

Region % Reduction in emission

2007 usd per tonne CO2

% Reduction in emission




USA-0.08 0.45 -0.09 0.45 -0.04 0.14

EU27-0.17 0.23 -0.11 0.16 -0.01 0.07

EEFSU-0.64 -1.15 0.37 -0.47 -0.06 -0.31

Jpn-0.78 1.27 -0.2 0.46 -0.03 0.2

RoA1-1.25 -0.07 -0.55 -0.33 -0.17 -0.12

EEx-0.65 -1.38 -0.45 -0.96 -0.22 -0.5

Chn-0.1 0.01 -0.02 0.09 0.11 0.12

Ind0.19 0.32 0.14 0.25 0.21 0.22

RoW0 -0.06 0.01 -0.02 0.01 0.05

7

With no use of the flexibilitymechanisms

With emission trading among Annex 1 countries

With worldwide emissiontrading

Region % Reduction in emission






USA -17 24 -17.4 24.2 -6.3 6.7EU27 -17 40.1 -11.8 24.3 -3.9 6.7EEFSU 1.7 0 -20.6 24.2 -7.3 6.7Jpn -30 121 -10.5 24.3 -3.4 6.7RoA1 -40 125.5 -15.1 24.3 -5.3 6.7EEx 1.3 0 0.8 0 -4.4 6.7Chn 0.4 0 0.3 0 -15.8 6.7Ind -0.3 0 -0.1 0 -21.9 6.7RoW 1.3 0 0.9 0 -5.8 6.7Annex 1 -16.8 -15.6 -5.5Non-Annex 0.8 0.5 -11.4

Leakage rate(incl. EEFSU) 5.7 na naLeakage rate(excl. EEFSU) 4.1 3.1 na

GTAP-E Group

• Surface Coal Mining, Land & Agriculture• Effects of a Natural Gas and Oil Export Shock• Impacts of Emissions Reduction

Under Paris Agreement• World post tax energy subsidies elimination: a

GTAP-E based analysis

Surface Coal Mining, Land & Agriculture

GTAP-E Group

ZHAO YuanfengInner Mongolia Agricultural University, China

LI YingzhuEnergy Studies Institute, National University of Singapore

The StoryRapid economic growth of China

Direct and indirect demand for coal increase, mainly satisfied by domestic supply

Domestic coal mining expands

Surface mining dominates due to low production cost

Surface Mining1. Reduction in available land in the short run2. Decrease in land productivity in the long run

Objective & Scenarios

Table 1. Scenarios

Short-run Scenario Long-run Scenario

w/o reduction in available land

with reduction in available land

w/o decrease in land productivity

with decrease in land productivity

Exogenous qo("Capital","CHN") = 15 qo("Capital","CHN") = 15

qo("land","Agr","CHN") = -2

qo("Capital","CHN") = 15 qo("Capital","CHN") = 15

afall("land","Agr","CHN") = -1

Parameters • Land, Capital and Natural recourses sluggish

• Smaller substitution elasticity in the Value-Added-Energy Nest of CHN sectors

• Default

Objective• To analyze the impacts of surface coal mining on agriculture

and other sectors

Simulation Results (1)

0.0

3.7

7.77.2

8.7 8.4

10.3

8.6

6.86.3

-2.0

3.0

7.77.3

8.88.3

10.3

8.7

6.8

5.8

-4

-2

0

2

4

6

8

10

12

Outputs at sector level in the short run

sr-w/o sr


0.0

4.2

9.4

5.76.1

7.4

11.0

8.1

7.07.3

0.0

3.9

9.3

5.86.3

7.4

11.0

8.1

7.0 7.2

0

2

4

6

8

10

12

Outputs at sector level in the long run

lr-w/o lr


2641

-3049

2794 120 16408021

152879

-383

28472866

-93

1641 1290 969 4008

160521

15 3521

-20000

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

USA EU27 EEFSU JPN RoA1 EEx CHN IND ROW

Welfare (EV)

sr lr

Sensitivity tests Table 2. Sensitivity tests

Reduction in available land:qo("land","CHN") = [-1,-3]

Decrease in land productivity:afall("land","Agr","CHN") = [-0.5,-1.5]

qo(j,CHN)

Mean s.d. RatioAgr 3.02 0.15 20Coal 7.67 0.00 76743Oil 7.27 0.01 573Gas 8.83 0.04 251Oil_pcts 8.34 0.02 361Electricity 10.27 0.00 5464En_Int_ind 8.69 0.03 326Oth_ind_ser 6.81 0.01 926CGDS 5.82 0.09 61

Mean s.d. RatioAgr 3.94 0.05 77Coal 9.35 0.00 5699Oil 5.84 0.02 274Gas 6.28 0.03 198Oil_pcts 7.36 0.01 1278Electricity 11.04 0.00 551767En_Int_ind 8.12 0.01 865Oth_ind_ser 6.97 0.01 1298CGDS 7.18 0.03 247

Effects of a Natural Gas and Oil Export Shock

Nisal HerathSusan Xu

• Motivation: Russia entered into a series of gas disputes with European countries, including reduction of natural gas export to the Europe.

• If oil exporting countries want to increase the price, they would decrease the supply of oil.

• To simulate these scenarios, there was a 30% reduction of natural gas from EEFSU to EU27, also there was 30% reduction of from EEx to all regions.

Background: Russia reduced 30% of natural gas export to EU27

After the shock

qxw: The aggregate gas export of EEFSU qim: The aggregate gas import into EU27

DTABLi: Trade Balance in Gas

qxs: Gas export sales from EEFSU to EU27

qxs(gas,EEFSU,EU27)

= -ams(gas,EEFSU,EU27) + qim(gas,EU27)

- ESUBM(gas) * [pms(gas,EEFSU,EU27) -ams(gas,EEFSU,EU27) - pim(gas,EU27)]

•Expansion effect & substitution effect: same direction.•Substitution effect: dominating

Expansion effect:qim = -1.50

Substitution effect:

Pim = -0.37Pms = 1.77ESUBM = 30.30

Welfare Impact

CNTalleffk1 pfacttax 2 prodtax 3 inputtax 4 contax 5 govtax 6 xtax 7 mtax Total2 EU27 -2.522 11.85 -18.138 -99.806 0.008 1.916 1.083 -105.6123 EEFSU 4.172 -263.975 68.404 -184.553 -0.898 -2824.8 -122.377 -3324.02

PRIVATE 1 welcnt 2 dvol 3 taxrateb 4 taxrateu Total2 EU27 -88.476 -123.523 113.147 113.147 14.2953 EEFSU -1.275 2.595 42.274 42.274 85.867

TRADE 1 welcnt 2 dvol 3 taxrateb 4 taxrateu Total2 EU27 0 938.983 0 0 938.9833 EEFSU -3366.74 -4502.1 42.203 43.461 -7783.18

WELFARE 1 co2trd 2 alloc_A13 endw_B14 tech_C1 5 pop_D1 6 tot_E1 7 IS_F1 8 pref_G1 Total2 EU27 0 -105.612 0 0 0 -334.871 -12.606 0 -453.093 EEFSU 0 -3324.02 0 0 0 -256.794 83.603 0 -3497.21

Scenario 1: 30% decrease in Oil exports from EEx region with rents going to exporter

Scenario 2: 30% decrease in Oil exports from EEx region with rents going to importer

Scenario 3: 30% decrease in Oil exports from EEx region with rents going to exporter and 30% decrease in Natural gas exports from EEFSU region to EU27

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0

0.1


Real GDP (% Change)

Scenario 1 Scenario 2 Scenario 3

-40000

-35000

-30000

-25000

-20000

-15000

-10000

-5000

0

5000

10000

1 2 3

Welfare Decomposition for Japan

Allocative Efficiency

TOT

Total

-18000

-16000

-14000

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

Japan Allocative Efficiency Effect


-15

-10

-5

0

5

10

15

20


Energy Price Index (% Change)


An improvement in the terms of trade is not captured in GDP

-6

-5

-4

-3

-2

-1

0

1

2

3


Terms of Trade (% Change)


-2.5

-2

-1.5

-1

-0.5

0

0.5

1


Per Capita Utility (% Change)


It is good to use more than one measure

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0

0.1


Real GDP (% Change)


Impacts of Emissions Reduction

Under Paris AgreementAug. 12th 2016Nozomi KatoJiayu Wang

Paris Agreement (agreed Nov. 2015 at COP21)

1997 2008 2012 2015 2020

Kyoto Protocol US dropped Mandatory target

for only developed countries

1st Commitment 2nd Commitment

Int’l negotiation for new framework

COP21: Paris Agreement Almost all the countries agreed Both developed & developing

countries have targets Each country sets its own target

New framework

Top-down Bottom-up

Japan, Canada, etc. dropped

Welfare change under Paris Agreement

EV is composed of CO2 Trading, Allocation efficiency effect, ToT, Investment-Saving

Even without emission trading, India gains welfare under Paris Agreement.

($ US million)

ToT % change under Paris Agreement

Energy demand↓, Energy price ↓ Fossil-fuel exporting countries ↓

Allocative Efficiency Effect under Paris Agreement

India gains welfare by shifting the allocation of intermediates & endowments from Coal to Oil, Gas, Oil products (same results with higher target)

That is against India’s position ‘emission reductions hurts our economy’

($ US million)

INDIA

Kyoto Protocol vs Paris Agreement

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

1 USA 2 EU273

EEFSU 4 JPN 5 RoA1 6 EEx 7 CHN 8 IND 9 ROW

Percentage change in emissions under Kyotal and Paris

Kyoto Paris

Uniform Carbon Tax(2007 USD per tonne)

Emissions Change (% deviation from

2007)Kyoto 6.7 -8.1Paris 28.1 -19.3

Kyoto Paris

Welfare TOT Welfare TOT

1 USA -0.04 0.14 -0.15 0.44

2 EU27 -0.01 0.07 -0.13 0.19

3 EEFSU -0.06 -0.31 -0.21 -0.94

4 JPN -0.03 0.20 -0.05 0.67

5 RoA1 -0.17 -0.12 -0.17 -0.27

6 EEx -0.22 -0.50 -0.79 -1.57

7 CHN -0.11 0.12 -0.36 0.25

8 IND 0.21 0.22 0.80 0.99

9 ROW 0.01 0.05 0.02 0.17

An Interesting Question: Why does Gas Production in China Reduce by 75%?

-160 -140 -120 -100 -80 -60 -40 -20 0 20

USA

EU27

EEFSU

JPN

RoA1

EEx

CHN

IND

ROW

Output Change under Paris Agreement (worldwide trading)

Agr Coal Oil Gas Oil_pcts Electricity En_Int_ind Oth_ind_ser CGDS

Discover China’s Gas Production Change

• qfd(gas,ele,CHN) = qft(gas,ele,CHN) - ESUBD(gas) * [pfd(gas,ele,CHN) - pft(gas,ele,CHN)]• -85 = -27 - 11 * [ 54 - 33 ]

Gas Production

Demand by Firms (Share 72%)

qfd(gas,ele,CHN)=-85

Demand by Consumers(20%)

qpd=-75

Demand by Government(0%)

qgd=-46

Export ( 8%)

So China switches to importing gas!

Why does the intermediate use of domestic gas price in electricity increase?

• Because of the CARBON TAX!• pfd(gas,ele,CHN) = SHVDFANC(gas,ele,CHN) * (pm(gas,CHN) +

tfd(gas,ele,CHN))+ 100.0 * CO2DFVDFA(gas,ele,CHN) * NCTAXB(REGTOBLOC(CHN))

• SHVDFANC: share of carbon-tax-excl. value of domestic i for use by j in region r

• CO2DFVDFA: emissions intensity of domestic i for use by j in region r• NCTAXB(REGTOBLOC(CHN)): Nominal carbon tax (22.3 USD)

Domestic factor price

Non-Carbon Composite

1*21

Carbon Composite100*0.01*

22

World post tax energy subsidies elimination: a GTAP-E based

analysis


August 12, 2016West Lafayette, USA

Maksym ChepelievMoonhee Cho

Terms and Definitions

World Energy Subsidies Distribution

Subsidies Representation in GTAP-E

1. Post tax energy subsidies are based on the recent IMF estimates (2013 data). (Coady D. et al. How large are energy subsidies (2015) IMF Working Paper WP15/105)2. Regional and commodity mapping to match the GTAP-E model was done.3. Energy subsidies were rescaled by regions based on the World Bank GDP data.

1 USA 2 EU27 3 EEFSU 4 JPN 5 RoA1 6 EEx 7 CHN 8 IND 9 ROW

2 Coal 259.6 408.9 499.6 300.0 342.4 - 460.5 961.1 739.0

3 Oil 26.1 35.5 20.6 29.2 32.6 83.7 38.3 25.9 29.1

4 Gas 54.1 88.9 76.5 95.3 59.9 215.0 323.4 62.6 96.9

5 Oil_pcts 24.7 18.5 20.3 13.8 23.5 95.7 24.0 27.3 20.7

6 Electricity 9.3 7.8 8.8 6.5 8.8 165.2 10.8 13.0 17.4

Estimated corrective taxes on intermediate energy inputs by regions, %

Set of experiments

Short term run• Sluggish capital• Sluggish labor• All standard esub values divided by 2

“tfm” and “tfd” shocks

Intermediate energy inputs taxation for all regions

Mid term run• Mobile labor• Mobile capital• Standard esub values

Welfare and trade results

Welfare TOT Welfare TOTUSA 154 029 8.75 9 160 3.98

EU27 90 753 2.96 -128 034 1.41EEFSU -105 266 -10.62 -85 275 -4.51

JPN 78 675 13.54 -4 051 4.97RoA1 -66 744 -4.59 -39 651 -1.64EEx -451 846 -18.11 -372 050 -10.37CHN -107 958 -1.3 -117 285 -0.11IND -2 107 6.17 -21 437 4.83

ROW -25 416 1.08 -70 351 0.72

Short-term Results Mid-term Results Short/mid term

Emissions reduction

coal oil gas oil_pcts coal oil gas oil_pctsUSA -24.7 -10.4 -6.2 -1.4 -48.5 -23.8 -18.9 -11.7EU27 -30.6 2.5 -6.8 -5.8 -54.9 -7.3 -20.4 -18.3EEFSU -36.4 1.2 -12.5 -8.7 -59.9 -3.6 -25.8 -19.1

JPN -23.7 12.3 -10.1 -2.7 -47.9 14.7 -28.1 -15.7RoA1 -27.3 4.5 -5.0 -6.6 -52.3 -0.7 -16.8 -17.2EEx -10.5 -19.1 -26.9 -27.6 -18.8 -27.2 -40.9 -40.9CHN -37.3 -22.0 -65.6 -16.4 -60.7 -39.3 -78.1 -33.2IND -35.8 -11.5 -12.7 -4.6 -68.5 -42.4 -37.0 -15.0

ROW -37.8 0.6 -14.1 -5.6 -63.7 -5.1 -32.4 -15.6

% reduction in emissionsShort-term Results Mid-term Results

Output changeAgr Coal Oil Gas Oil Prod Electricity Ener-Inten Others CGDS

USA -2.38 -25.47 -11.75 -15.07 1.56 -8.32 -0.76 -0.11 5.06EU27 -1.82 -29.88 -14.05 -18.14 -6.66 -6.74 -0.57 -0.42 5.82EEFSU -0.65 -30.63 -7.18 -13.1 -4.02 -11.01 -1.77 -0.73 -10.15

JPN -1.75 -30.02 -25.9 -27.46 -1.38 -4.89 -3.5 -0.14 12.52RoA1 -0.83 -25.85 -12.51 -6.21 -4.13 -4.55 4.33 -0.2 -3.35EEx -1.34 -6.64 -1.92 -1.78 -31.94 -40.9 -10.85 -3.62 -46.28CHN -1.71 -35.65 -24.96 -94.15 -21.25 -16.44 -4.05 -2.21 -11.01IND -0.86 -30.59 -12.22 -13.79 -0.25 -17.77 -5.92 -1.38 -5.39

ROW -0.64 -28.96 -20.22 -19.02 -1.5 -13.93 -1.23 -0.55 -1.4USA -2.91 -48.82 -27.09 -30.35 -4.51 -16.65 1.68 -0.71 3EU27 -2.99 -52.87 -38.42 -54.77 -20.11 -9.87 1.13 -1.48 3.75EEFSU -0.81 -47.59 -17.53 -24.06 -12.59 -18.99 -14.02 -0.71 -5.92

JPN -2.67 -50.91 -50.76 -72.38 -13.03 -10.8 -4.4 -1.1 5.84RoA1 -1.57 -53.41 -35.98 -17.42 -14.72 -5.48 12 -0.4 0.07EEx -1.63 -21.36 -8.14 -6.99 -54.29 -58.88 -24.3 -3.31 -28.08CHN -2.99 -57.8 -51.75 -99.9 -40.81 -22.9 -6.9 -3.99 -7.33IND -1.96 -64.36 -29.53 -48.4 -7.84 -29.35 -13.02 -2.92 -5.57

ROW -0.92 -53.11 -39.43 -57.46 -8.93 -25.41 -2.97 -1.4 -1.19

Output Increase (%)

Short-term

Mid-term

Trade balance

Agr Coal Oil Gas Oil Prod Electricity Ener-Inten Others TotalUSA -5 109 -1 132 50 286 -5 940 6 929 -559 -8 630 -239 675 -203 831EU27 -7 326 6 077 81 212 13 889 -7 510 621 6 253 -310 410 -217 192EEFSU 1 470 -2 696 -54 972 -11 491 8 456 543 7 342 74 420 23 073

JPN -1 965 4 446 29 443 6 430 -858 0 -9 962 -145 423 -117 890RoA1 -806 -8 155 -22 870 -10 094 1 929 1 124 22 551 35 987 19 666EEx 11 218 -5 346 -131 902 5 666 -9 875 -341 1 346 435 539 306 305CHN 2 616 -649 31 077 -3 654 -7 372 -331 -18 906 134 367 137 148IND -489 2 195 15 493 559 3 189 -211 -8 304 11 173 23 605

ROW -1 832 6 630 372 3 743 6 020 -847 2 027 13 002 29 116USA -5 768 -1 498 24 031 -12 251 33 612 -785 27 176 -198 879 -134 363EU27 -9 663 7 555 78 909 3 619 -10 594 3 126 62 526 -290 419 -154 941EEFSU 1 644 -2 937 -54 635 -8 254 16 244 -9 -19 143 80 823 13 733

JPN -2 116 4 974 27 805 7 191 3 053 0 -9 558 -85 704 -54 354RoA1 -1 078 -10 370 -35 814 -9 273 2 624 1 669 50 924 242 -1 077EEx 11 028 -5 070 -56 871 25 996 -56 388 -1 075 -73 264 360 422 204 778CHN 3 441 -477 32 536 -2 999 -16 359 -493 -22 760 91 590 84 479IND 96 2 518 11 528 -223 8 476 -320 -18 402 15 962 19 636

ROW 486 8 015 -26 621 -4 302 22 881 -2 113 -789 24 550 22 108

Trade Balance

Short-term

Mid-term

Thank you!


Slide Number 1Slide Number 2Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7GTAP-E GroupSurface Coal Mining, Land & AgricultureThe StorySurface Mining�1. Reduction in available land in the short run�2. Decrease in land productivity in the long runObjective & ScenariosSimulation Results (1)Simulation Results (2)Simulation Results (3)Sensitivity tests Effects of a Natural Gas and Oil Export ShockSlide Number 18Background: Russia reduced 30% of natural gas export to EU27After the shockqxs: Gas export sales from EEFSU to EU27Welfare ImpactSlide Number 23Slide Number 24Slide Number 25Slide Number 26�Impacts of Emissions Reduction�Under Paris AgreementParis Agreement (agreed Nov. 2015 at COP21)Welfare change under Paris AgreementToT % change under Paris AgreementAllocative Efficiency Effect under Paris AgreementKyoto Protocol vs Paris AgreementAn Interesting Question: Why does Gas Production in China Reduce by 75%?Discover China’s Gas Production ChangeWhy does the intermediate use of domestic gas price in electricity increase?Slide Number 36Slide Number 37Slide Number 38Slide Number 39Slide Number 40Slide Number 41Slide Number 42Slide Number 43Slide Number 44Slide Number 45

The GTAP-E Model: An Extension of the GTAP Model for ......2 EU27 0 -105.612 0 0 0 -334.871 -12.606...

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